Lincoln National's Q1 Results: Adjusted Earnings Rise Amid Revenue Headwinds

Lincoln National (LNC) reported mixed financial results for the first quarter of 2025, with adjusted earnings surpassing expectations while revenue fell short of forecasts. The insurer’s adjusted operating income rose to $280 million, or $1.60 per share, beating analyst estimates of $1.54, despite a reported net loss of $722 million driven by market-related headwinds. This performance underscores the company’s resilience in key segments even as macroeconomic challenges persist.

Revenue Decline and Operational Hurdles

Lincoln’s total revenue dipped to $4.68 billion, missing Wall Street’s $4.71 billion estimate. The shortfall stemmed from a $0.9 billion after-tax loss tied to declining interest rates and equity markets, which impacted risk-based benefits. However, adjusted operating income grew 27% year-over-year, reflecting strong performance in core businesses. The company emphasized that its results were operationally robust, with strategic initiatives offsetting broader market pressures.

Segment Breakdown: Growth Drivers and Weaknesses

The insurer’s success hinged on its Annuities and Group Protection segments, which delivered standout performance:
- Annuities: Sales surged 33% to $3.8 billion, driven by demand for spread-based products. Average account balances grew 5.4% to $163.7 billion, highlighting customer retention and product diversification.
- Group Protection: Earnings jumped 26% to $101 million, with operating margins expanding 120 basis points to 7.4%, reflecting operational efficiency.
- Life Insurance: While still unprofitable, the segment improved, narrowing its loss to $16 million from $35 million a year earlier due to better mortality rates and cost controls.

Conversely, Retirement Plan Services faced headwinds, with operating income dropping 6% due to a plan termination. Net flows here turned negative (-$494 million), signaling challenges in retaining assets amid volatile markets.

Strategic Moves to Fuel Growth

Lincoln’s partnership with Bain Capital, announced in Q1, aims to accelerate growth through technology integration and operational scalability. The deal, expected to close by late 2025, underscores the company’s focus on leveraging external expertise to enhance competitiveness. Additionally, Lincoln maintained a robust capital position, with a risk-based capital ratio exceeding 420%, reinforcing its financial flexibility.

Risks and Challenges

• Market Volatility: The net loss highlights sensitivity to interest rate and equity market movements.
• Segment Disparities: While Annuities and Group Protection thrived, Life Insurance and Retirement Plan Services lagged, requiring closer scrutiny.
• Regulatory and Macroeconomic Uncertainty: The insurer must navigate evolving regulations and economic conditions, which could impact pricing and demand.

Conclusion: Positioning for Long-Term Gains

Lincoln National’s Q1 results demonstrate a divergent narrative: adjusted earnings growth masks underlying revenue pressures, yet strategic investments and segment-specific successes position the company for sustained growth. The Annuities and Group Protection segments, with their combined 29.5% revenue growth, are key pillars of resilience. Meanwhile, the partnership with Bain Capital and cost discipline—evidenced by a $15–$20 million annual savings target—signal a proactive approach to margin protection.

While challenges remain, particularly in Life Insurance and Retirement Services, Lincoln’s strong liquidity and diversified portfolio suggest it is well-equipped to weather current headwinds. With shares up 0.03% post-earnings and a Zacks Rank #3 (Hold), investors may want to monitor Q2 progress for signs of stabilization in underperforming segments. For now, Lincoln’s adjusted earnings beat and strategic bets make it a cautiously optimistic play in an uncertain insurance landscape.

Data as of Q1 2025. Always consider consulting a financial advisor before making investment decisions.